Reporting Foreign Assets

Many people own foreign assets. Whether it derived from your family’s country of origin, or whether it is part of a diverse investment portfolio, there may be important tax implications that come with owning this property. Since 2010, the IRS has required that specific taxpayers report information about “specified foreign financial assets” if those assets exceed $50,000 in value.

This new law was part of the Foreign Account Tax Compliance Act (FATCA), which sought to discourage taxpayers and institutions from concealing assets overseas. It did so by requiring that foreign institutions submit financial reports regarding customers who are U.S. citizens and by requiring disclosure of foreign assets by those citizens.

What is a Specified Foreign Financial Asset?

The IRS defines a specified foreign financial asset is defined as:

  • Financial accounts maintained by a foreign financial institution.
  • The following foreign financial assets if they are held for investment and not in an account maintained by a financial institution:
  1. Stock or securities issued by someone other than a U.S. person
  2. Any interest in a foreign entity, and
  3. Any financial instrument or contract that has as an issuer or counterparty that is not a U.S. person.

Who Needs to Report?

The following people are required to report foreign assets: (1) U.S. citizens; (2) aliens who have resided in the U.S. during any part of the tax year; (3) non-resident aliens who are part of a joint tax return; or (4) a “bona fide” resident of American Samoa or Puerto Rico.

The valuation of a foreign asset must be in U.S. dollars, and the taxpayers specified above must report the highest valuation of that the asset during the tax year, as well as the value of the asset on the last day of the year. Individual filers must submit a report if the foreign asset exceeds $50,000 on the last day of the year or has exceeded $75,000 at any time during the tax year. The minimum threshold doubles for married taxpayers who file a joint return.

What Do I Need to File?

If you and your assets meet the aforementioned three requirements, you must complete and file Form 8938. This is a relatively detailed form and requires disclosure of a lot of information about your foreign accounts. If you have questions and concerns about your foreign assets, you should contact a tax attorney to answer your questions.

A Tax Attorney Can Help You

If you have foreign assets and are uncertain whether the FATCA applies to you, contact my office. Reporting foreign assets is relatively new to the law and many people make mistakes in over reporting and under reporting these assets. I have been a tax attorney for over two decades and have a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court. Call The Law Offices of Robert S. Thomas at 847-392-5893 to schedule an appointment or visit our website today.

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